-Add different features when leveling up. Examples:
Isengard:
Uruk infantry, at level 2 has a bonus for his defensive stance. At level 3, two or three Bersekers are added. With less attacking power than normal Bersekers, but with the same small area attack.

Goblins:
Goblin infantry, at level 2, adds more duration and damage to its venom.
to level 3, a troll is added. It doesn't throw rocks, it can't take trees either. It is weaker than a normal troll. But it has special mechanics. Like throwing goblins to scare. When he dies he crushes the enemies etc...

Dwarfs:
Dwarf Infantry. At level 2 they can repair a % of a building. At level 3 they have a speed buff when activating a skill (3 seconds?). If during the skill they meet someone, they crush them like cavalry (LOL).

Elves:
Infantry elf. At level 2, they can be healed in any tree. Even the mallorn you build. At level 3 they are immune to poison and fear, and get a skill that cancels out the enemy leadership buff around them.

Men of the West:
Soldiers of Gondor. No idea.

Mordor:
Orc infantry. At level 2 they get some health for every death, a nearby Nazgul doubles their experience. At level 3 they regenerate orcs to nearby units (orc infantry), only during combat. For example, every 3 dead orcs appears 1. The own unit at level 3, for every two dead orcs regenerates one. You cannot stack with other level 3 units.

This would only apply to infantry, so as not to complicate it so much. Infantry is the only role that doesn't have a very defined purpose, it depends on each faction, giving a layer of depth to infantry could make the game more fun.

In addition, with this system of levels you would have a good reason to buy the standard upgrade in the early game.

I think that level 5 is fine, because 3 is to low and level 10 is a waste of time in a aggressive/spam game that only have sense in BFME 1 campaign/War of the Ring
Stances are to passive, they would be better just as an behavior mode (don't attack enemies-attack any enemy) and more formations besides Porcupine for all pikemen and Shield Wall for Uruks/SoG. But abilities would be better for elite units, besides things like Guardian Charge. Horde number increase is interesting but adding pre existing faction units or improving their stats is a similar system to the BFME combo hordes and some upgrades like Venom Sacks, repair for dwarves have sense, but there is Rebuild that probably is gonna end as a unique dwarven spell because all spell books must be different